Colony Apartments v. AIMCO Residential Group, L.P. , 63 F. App'x 122 ( 2003 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
COLONY APARTMENTS, Chapel Hill, 
Limited Partnership,
Plaintiff-Appellant,
v.
AIMCO RESIDENTIAL GROUP, L.P.,
Defendant-Appellee,
ABACUS PROJECT MANAGEMENT,
INCORPORATED,
Defendant & Third Party
Plaintiff-Appellee,
 No. 02-1815
and
EICHLER, FAYNE & ASSOCIATES;
INSIGNIA PROPERTY MANAGEMENT,
Defendants,
v.
BALCOR REALTY INVESTORS, LTD.,
Third Party Defendant.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Alexander Williams, Jr., District Judge.
(CA-00-1514-AW)
Argued: April 3, 2003
Decided: April 30, 2003
Before WILKINS, Chief Judge, and MOTZ and
KING, Circuit Judges.
2 COLONY APARTMENTS v. AIMCO RESIDENTIAL GROUP
Reversed and remanded by unpublished per curiam opinion.
COUNSEL
ARGUED: Stanley James Reed, LERCH, EARLY & BREWER,
CHARTERED, Bethesda, Maryland, for Appellant. Sheila Christine
Stark, PIPER RUDNICK, L.L.P., Washington, D.C., for Appellees.
ON BRIEF: Lauri E. Cleary, Suzanne S. Nash, LERCH, EARLY &
BREWER, CHARTERED, Bethesda, Maryland, for Appellant. Cathy
A. Hinger, PIPER RUDNICK, L.L.P., Washington, D.C., for Appel-
lee Abacus; Rodney F. Page, BRYAN CAVE, L.L.P., Washington,
D.C., for Appellee AIMCO.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
In this diversity case, the purchaser of an apartment complex
brought suit for fraud, negligence, and related counts against the for-
mer manager of the complex and a company that had conducted a
physical inspection of the property. The district court granted sum-
mary judgment to the defendants on limitations grounds. We reverse.
I.
In 1996, Colony Apartments-Chapel Hill, L.P. ("Colony") pur-
chased a 198-unit, multi-building apartment complex located in
Chapel Hill, North Carolina from Balcor Company. Prior to the sale
of the complex, AIMCO Residential Groups, L.P. ("AIMCO") had
managed the property for Balcor. At the time of the sale, Abacus
Management, Inc. ("Abacus") conducted a physical inspection of the
property. After purchasing the complex, Colony hired Pinnacle Realty
COLONY APARTMENTS v. AIMCO RESIDENTIAL GROUP 3
Management Company to manage the property. Pinnacle employee
Brenda Measamer was assigned to manage the complex.
Sometime after Colony purchased the complex, Ms. Measamer
became aware of numerous problems with the property relating to
water damage. Colony does not contest that in March 1998 it received
actual notice of structural problems with the buildings resulting from
water damage when maintenance staff discovered rotten floor joists.
In 1999, Colony commissioned a new engineering report that revealed
that the entire complex suffered from structural deficiencies. On May
24, 2000, Colony filed this action in the United States District Court
for the District of Maryland, alleging causes of action against Abacus
for professional negligence, negligent misrepresentation, and detri-
mental reliance, and against AIMCO for negligent and fraudulent mis-
representation.1
The district court granted the defendants summary judgment on the
ground that the statute of limitations had run. Colony noted a timely
appeal.
II.
Because this is a diversity action,2 the choice of law of the forum
state, in this case Maryland, applies. Riesett v. W.B. Doner & Co., 293
F.3d 164, 173 n.5 (4th Cir. 2002) (citing Klaxon Co. v. Stentor Elec-
tric Mfg. Co., 313 U.S. 487 (1941)). Under Maryland’s conflict of
laws rules, "when a cause of action accrues in one state and the adju-
dicatory forum of the action lies in another state," courts apply "the
procedural law of the forum state, and the . . . substantive law of the
place (state) of the wrong." Naughton v. Bankier, 691 A.2d 712, 716
(Md. Ct. Spec. App. 1996) (citations omitted). Implicitly concluding
(without demurral from the parties) that the statute of limitations
1
This complaint was later amended to correct the name of a defendant
and add a third defendant who was later dropped. The substantive claims,
however, have never changed.
2
Colony is a Maryland limited partnership with its principal place of
business in Maryland. Abacus is an Arizona corporation with its princi-
pal place of business in Arizona. AIMCO is a South Carolina corpora-
tion.
4 COLONY APARTMENTS v. AIMCO RESIDENTIAL GROUP
defense raises a procedural issue, the district court proceeded to apply
the Maryland law of limitations.
The Maryland Code provides that "[a] civil action at law shall be
filed within three years from the date it accrues . . . ." Md. Code Ann.,
Cts. & Jud. Proc. § 5-101 (2002). Because the statute does not define
the term "accrues," determination of when an action accrues has been
left to the courts, which have adopted the "discovery rule." Pappano
v. Chevy Chase Bank, 806 A.2d 334, 338 (Md. Ct. Spec. App. 2002)
(citation omitted). Under the discovery rule, "a statute of limitations
[is] triggered when a plaintiff knows or, with the exercise of reason-
able diligence, should have known, of the existence of an injury." Id.[I]n simple terms, a plaintiff is only on inquiry notice, and
thus the statute of limitations will begin to run, when the
plaintiff has "knowledge of circumstances which would
cause a reasonable person in the position of the plaintiff[ ]
to undertake an investigation which, if pursued with reason-
able diligence, would have led to knowledge of the alleged
[tort]."
Lumsden v. Design Tech Builders, Inc., 749 A.2d 796, 802 (Md.
2000) (quoting O’Hara v. Kovens, 503 A.2d 1313, 1324 (Md. 1986)).
Furthermore, like federal law and that of most states, under Mary-
land law "[t]he court shall enter [summary] judgment in favor of or
against the moving party if the motion and response show that there
is no genuine dispute as to any material fact and that the party in
whose favor judgment is entered is entitled to judgment as a matter
of law." Md. Rule 2-501(e). "If the facts are susceptible of more than
one inference, the materiality of that arguable factual dispute must be
judged by looking to the inferences that may be drawn in a light most
favorable to the party against whom the motion is made." Frederick
Rd. Ltd. P’ship v. Brown & Sturm, 756 A.2d 963, 972 (Md. 2000)
(citations omitted). Furthermore, because "the question of notice gen-
erally requires the balancing of factual issues and the assessment of
credibility or believability of the evidence . . . ‘whether or not the
plaintiff’s failure to discover his cause of action was due to failure on
his part to use due diligence . . . is ordinarily a question of fact for
the jury.’" Id. at 974 (quoting O’Hara, 503 A.2d at 1320).
COLONY APARTMENTS v. AIMCO RESIDENTIAL GROUP 5
Thus, the issue before us is whether, taking the facts in the light
most favorable to Colony, the defendants were entitled to judgment
as a matter of law that Colony had inquiry notice of structural defects
in the complex more than three years prior to filing its compliant (i.e.,
before May 24, 1997), or whether a reasonable jury could conclude
otherwise.
III.
The district court concluded as a matter of law that prior to May
24, 1997, "Ms. Measamer was on notice of facts which would lead
an ordinary prudent person to investigate the structural soundness of
the buildings." The court based its conclusion on several tenant sur-
veys received by Ms. Measamer prior to May 24, 1997:
[O]ne survey said, "The dampness that is under our 1st floor
apt — it makes our carpet smell musty & moldy — we have
allergies — this isn’t good for our health — we’ve told the
staff — they didn’t seem to believe us . . .  into the damp-
ness under building L. A phone repairmen [sic] said there is
water under our apt." Another survey noted, "Since the way
to the front of main entrance N1, 2, 3, 4 is lower than the
surround (sic) area, there is a lot of water when it rains. So
please fix it." A third survey stated, "Mildew odor difficult
to tolerate. Entrance ways (carpet, smell) are unsightly."
Another tenant complained that "There was a lot of insula-
tion that fell which I had to clean up . . . Turning on the hot
water, I have a rush of orange / brown water which eventu-
ally cleared but this is absurd! . . . I have water stains all
over my ceiling. Repainting doesn’t solve the problem. The
wood in the roof is probably rotten or at least has holes in
it." Finally, another tenant reported, "Drainage for all those
beautiful new machines is inadequate, hence — wet and
dirty floors."
The court also noted that in Ms. Measamer’s deposition testimony,
she stated "that on January 7, 1997, she received her first tenant com-
plaint regarding water leaks or wetness within apartment walls or
6 COLONY APARTMENTS v. AIMCO RESIDENTIAL GROUP
bathrooms, i.e., that ‘Apartment L-13 bathroom ceiling is coming
down.’"3
These complaints do not suffice to entitle the defendants to judg-
ment that as a matter of law, Ms. Measamer, and so Colony, were on
inquiry notice of structural defects in the buildings. To be sure, it is
arguable that Colony’s "failure to discover [its] cause of action was
due to failure on [its] part to use due diligence." O’Hara, 503 A.2d
at 1320 (internal quotation marks and citations omitted). However, it
is also arguable that Colony’s actions were objectively reasonable
under the circumstances. This determination "is . . . a question of fact
for the jury." Id. (internal quotation marks and citations omitted).
For several reasons, it is "at least debatable" whether Colony was
"aware of facts sufficient to warrant investigation," Pennwalt Corp.
v. Nasios, 550 A.2d 1155, 1164 (Md. 1988) (citation omitted), into
the structural soundness of the buildings. First, Abacus had conducted
a physical inspection of the complex only months before Ms. Mea-
samer received the tenant surveys, and the Abacus report identified
no structural defects or plumbing problems. It could be argued that
Colony acted reasonably in relying on this report and in not immedi-
ately commissioning a second study of the complex’s structural
soundness. Second, Ms. Measamer testified, without contradiction,
that the nature of the complaints was "fairly minor and fairly stan-
dard," and "typical." Ms. Measamer also testified that the cause of
problems such as a tile coming down around the bathroom could be
different from what caused the structural damage that was later dis-
covered. Third, as the district court itself acknowledged, only one or
two of the complaints have implications as to the structural integrity
of the building. And even these complaints indicate a problem in only
one out of the fifteen buildings in the complex.
Notwithstanding this evidence, the district court granted summary
judgment to the defendants, reasoning:
3
Similarly, Abacus cites a letter dated December 20th, 1996, in which
Ms. Measamer describes rotting columns, four of which "are actually
structural." However, Ms. Measamer later explained unequivocally that
the columns were not structural, but were simply decorative.
COLONY APARTMENTS v. AIMCO RESIDENTIAL GROUP 7
It is difficult to believe that a [sic] ordinary prudent person
who reviewed the tenant surveys and discussed them with
another manager would not have investigated further into
the tenants’ complaints. . . . Based on the tenant surveys and
complaints in which Ms. Measamer was involved, it appears
that she was put on inquiry notice as to some structural
problems.
Rather than deciding whether defendants were entitled to a judg-
ment as a matter of law that the tenant surveys put Ms. Measamer on
inquiry notice of structural problems, the district court made its own
determination as to whether Ms. Measamer’s actions were objectively
reasonable, "find[ing]" implied knowledge of structural deficiencies.
Indeed, by using language such as "it appears" and "it is difficult to
believe," the court itself seems to suggest the possibility of an alter-
nate conclusion. Moreover, in refusing to credit Ms. Measamer’s
uncontroverted characterization of the complaints as "fairly minor and
fairly standard," the court engaged in an implicit credibility assess-
ment, and made its own factual determination that the complaints
unequivocally suggested structural problems. A jury may so hold, but
such questions are "not susceptible to resolution on summary judg-
ment." Pappano, 806 A.2d at 341.
IV.
For these reasons, we reverse the judgment of the district court and
remand for further proceedings consistent with this opinion.
REVERSED AND REMANDED